The Wednesday 10: Game Industry Mergers

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The deals that changed the gaming world.

By Levi Buchanan, Ryan Geddes

Today the videogame world received news of a series of mergers and partnerships in what seemed like a coordinated effort by the games industry to flood our inboxes. In separate announcements, ZeniMax Media, the parent company of Bethesda Softworks, announced it was acquiring id Software; Mythic Studios said it would soon merge with BioWare (itself a division of Electronic Arts); and to top it all off, THQ announced it will restructure its operations into three new divisions.

While sharper minds around the IGN offices began to instantly analyze these changes, our minds headed straight for memory lane. The past few years have seen major changes to the makeup of the videogame industry, so we decided to put together a brief list of some of the more important moments in gaming merger history. These are the mergers (and in some cases outright buyouts) that have changed the landscape of the videogame world dramatically.

Koei & Tecmo

The most recent high-profile merger of two Japanese game publishers, Koei Tecmo Holdings grouped Koei brands like Dynasty Warriors and Nobunaga's Ambition with Tecmo franchises like Ninja Gaiden and Dead or Alive. And unlike the Square-Enix merger, crossover titles are virtually assured. The unlikely marriage was announced in November 2008 and finalized in April 2009 in a $207.7 million stock deal. Square-Enix had previously bid for Tecmo, but it was revealed afterward that Tecmo and Koei had been in detailed planning talks for months. The merger makes Koei Tecmo Holdings a stronger player in the increasingly competitive videogame industry, but the high-profile departure of Team Ninja head Tomonobu Itagaki last year and subsequent legal battles present significant challenges for the new company.

id & Bethesda

The House That Doom Built is now a part of the Fallout/Oblivion universe. Today, id Software announced it has been sold to ZeniMax Media, Bethesda Softworks' parent company. Until today's deal, id Software was one of the last large independent game developers -- but like the EA-BioWare buyout, ZeniMax has no interest in meddling with the id formula beyond finances. According to a statement by id's John Carmack, the deal will let id grow and recruit new talent, so perhaps we'll see more games from id in the future. However, from here on out, Bethesda will publish id's games, save for the action game Rage, which is still due to be released by EA.

BioWare & Pandemic

In November 2005, BioWare partnered with Pandemic Studios to create a co-existing independent studio team, funded in large part by Elevation Partners. (Yes, that's Bono's private equity fund.) The marriage made sense. Each studio had strengths the other did not. BioWare was an RPG/adventure powerhouse and Pandemic made its mark with Star Wars: Battlefront and Full Spectrum Warrior. In a rapidly consolidating industry, the teaming would let these studios maintain control over their content and which publishers they worked with. Of course, this freedom would not last for long.

Namco & Bandai

In the late 1990s, videogame industry watchers were confidently predicting that Japanese toy maker Bandai would eventually merge with game maker SEGA to form a juicy entertainment dumpling of otaku synergy. And in 1997, the two companies announced their plans to do just that. But then Bandai's Tamagotchi line of virtual pet toys exploded onto the world market and Bandai pulled out of the merger. Almost 10 years later, Bandai eventually merged with Namco instead in a stock swap, and SEGA joined forces with arcade king Sammy. Today Namco Bandai Holdings is a huge player in the Japanese toy and game industry and has seen success in the West as well with fighting games (Tekken), action games (Naruto) and role-playing games (Tales series). And according to the company's official web site, "the 21st Century will be an era of spirituality." So there's that…

Squaresoft & Enix

When Japanese role-playing game developers/publishers Squaresoft and Enix joined forces in April 2003, they created an unstoppable force in their home country and laid the groundwork for an international expansion. The merger created a company with tens of billions of yen in annual revenue and consolidated the firms' hold on the market. But when the deal was announced, Japanese gamers had only one question on their minds: Would the merger result in an eventual mashup of the two companies' flagship RPG series, Final Fantasy and Dragon Quest? The answer was and continues to be a resounding no, and the two properties remain largely segregated by interest: FF in the West and Dragon Quest in Japan, although there is significant crossover appeal. Currently, Square-Enix is struggling to grow its business internationally, although sales of titles in its top franchises remain strong.

SEGA & Sammy

The failure of the Dreamcast drove SEGA to exit the hardware game and choose the path of third-party publisher. With its finances in the dumps, SEGA was essentially put up for sale by its holding company CSK. Microsoft and Bandai were both potential suitors, but it was pachinko giant Sammy that bought in, making for an odd partnership. By 2004, Sammy had enough shares in SEGA to control it and form SEGA Sammy Holdings. Since the merger, SEGA has experienced solid commercial success with multiple Sonic games, although many gamers have lamented the loss of SEGA's risk-taking spirit with games like Jet Set Radio.

Microsoft & Bungie

The early relationship between Microsoft Corp. and Bungie Studios was not so much merger as it was acquisition. In 2000, Microsoft bought the small independent developer and made it part of Microsoft Game Studios. But what it really bought was Halo, a first-person shooter that went on to define the Xbox experience and help MS make its mark on the console gaming world. Seven years later (naturally), Bungie left Microsoft's fold, returning to its independent roots. But the relationship between the two companies is still strong, and development partnerships remain in place. We don't know all the details of the Microsoft/Bungie partnership, but it was undoubtedly one of the smartest (and most lucrative) pairings in gaming history.

BioWare & Electronic Arts

Revered by hardcore gamers for epics like Neverwinter Nights, Mass Effect, Baldur's Gate, and Star Wars: Knights of the Old Republic, BioWare enjoyed unparalleled success as an independent studio. However, in an effort to expand its catalog beyond franchise titles, game giant Electronic Arts bought up BioWare in late 2007. To the delight of BioWare fans, EA has been careful not to exert too much control over its new unit, allowing BioWare to retain its name. Since the buyout, BioWare has continued to work on the Mass Effect universe as well as a new RPG, Dragon Age. At E3 2009, BioWare showed off a new persistent online game, Star Wars: The Old Republic.

Activision & Vivendi

On December 2, 2007, videogame publishing powerhouse Activision made a shocker of an announcement. In just a few short months, it would merge with the games division of French media conglomerate Vivendi Universal (itself an amalgamation of brands like Seagram's and Canal+). The resulting company would be named Activision Blizzard, incorporating the name of Vivendi's most popular developer: World of Warcraft and Starcraft developer Blizzard Entertainment. The deal closed on July 9, 2008 and threw ActiBlizz into instant contention for the title of World's Biggest Third-Party Game Publisher. Its largest competitor, Electronic Arts, reported net revenue of $3.67 billion in 2008, compared to Activision's $2.9 billion. Both are staggering figures with equally huge profit margins. Today, Activision Blizzard remains the largest merger in videogame history and doesn't look likely to be toppled any time soon.

EB & GameStop

While not a merger of development studios or publishers, the 2005 merger of videogame retailers EB and GameStop perhaps had the biggest effect on gamers. Both chains were the top places to trade in used games for credit as well as place pre-orders for new titles. After the merger, GameStop was able to effectively control trade-in values and not necessarily to the benefit of gamers... or publishers. Trade values have dropped over the years, although the cost of buying a used game often results in little more than a $5 savings. GameStop has continued to expand its reach worldwide, picking up a number of international chains. Its store count now tops 6,000, making it the world's destination for hardcore game buyers.